Brexit and Bangladesh: Implications for Trade and Market Access

Abstract

This paper explores the trade related implications of the UK referendum on leaving the EU (Brexit) for Bangladesh. The UK is a key trading partner of Bangladesh and over the past years the country has benefitted significantly from duty-free and quota-free market access to the UK under the Everything But Arms (EBA) initiative of the EU. However, when Brexit takes effect in March 2019, the scenario is set to change. The post-Brexit market access scenario will hinge on a number of factors including the terms of Brexit, UK’s policy towards the LDCs, the new rules of origin, and exchange rate movements. The paper anticipates the terms of Brexit and the attendant implications from the perspective of Bangladesh’s trading relations with the UK. It has tried to capture the likely fallouts of Brexit for exports from Bangladesh to the UK with help of a gravity model exercise. The results indicate that in the absence of duty-free market access, for UK not being a member of the EU and in view of the appreciation of Taka vis-a-vis the Pound, Bangladesh’s exports to the UK market will be adversely affected, to varying degrees. The paper has underpinned the importance of taking necessary preparatory steps and negotiating with the UK to help secure Bangladesh’s market presence in post-Brexit UK.